. \2 pages IN THE FEDERAL COURT OF AUSTRALTA NEW SOUTH WALES DISTRICT REGISTRY No. G420 of 1984 we eww GENERAL DIVISTON ON APPEAL from a Single Judge of the Federal Court of Australia BETWEEN : VIRENDRA KUMAR VERMA Appellant AND: DEPUTY COMMISSTONER OF TAXATION Respondent ORDER JUDGE: FOX, McGREGOR and WILCOX JJ. DATE OF ORDER: 22nd February 1985 EX TEMPORE WHERE MADE: Sydney. THE' COURF' ORDERS THAT: i. The appeal be dismissed. 2. The appellant pay the respondent's costs of the appeal. oP 5 TAB Raptor i a es iN THR FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT PEGISTRY No. G420 of 1984 wewrwnr GENERAL DIVISTON ON APPEAL from a Single Judge of the Federal Court of Australia BETWEEN : VIRENDRA_ KUMAR VERMA Appellant AND: DEPUTY COMMISSIONER OF TAXATION Respondent CORAM: FOX, McGREGOR and WILCOX Jd. DATE: 22 February, 1985 . REASONS FOR JUDGMENT (EX TEMPORE) FOX J. The court will deliver its decision now. What I am about to say is the judgment of the Court. This is an appeal froma decision of a judge of this Court sitting in bankruptcy, in which he made an order for the sequestration of the estate of the present appellant, on the petition of the respondent the Deputy Commissioner of Taxation. Teh i ahi atid omelet are hd decade Demeter cacameermmieniaametiieeanenemmmemeted His Honour refused applications by the appellant to dismiss the petition in reliance upon s.92(2)(b) of the Bankruptcy Act 1966 and, alternatively, to adjourn the hearing of the petition, but granted ai stay of proceedings on the sequestration order for twenty-one days. This stay, we are informed, was subsequently extended until the determination of this appeal. The situation was, in 1ts elements, common enough. The Deputy Commissioner of Taxation had issued to the appellant a number of _ assessments for income tax. He had disallowed large claims for deductions. The petition was based on the assessments, the amount of indebtedness claimed being - - $632,693.23. In August 1983 judgment had been signed by default in the Supreme Court for two of the assessments, totalling $331,793.67. At the time of the hearing of the petition and, indeed before judgment was signed, the assessments had heen referred to a Board of Review, but the Board had not then heard aan them, and it was not expected that it would be able to do so until some time well into 1985. oe : It is the refusal of his Honour to dismiss the petition or ta grant the adjournment which is in substance the subject of this appeal. It is acknowledged that in either event the - exercise of a discretion was involved. It is not claimed that, having refused the adjournment, his Honour did not have the material hefore him on which he could properly make aA EIEIO TY ILE IEE GT TENS A I IOLA PPLE RET OCT sequestration order. We have been informed by counsel that since the time of the hearing before his Honour, the Board of Review has heard and decided a reference or references with respect to the amount of $331,793.67. This amount comprised almost entirely a claim fora deduction made by the appellant purportedly under Division 10B of Part III of the Income Tax Assessment Act 1936 ("the Act"), in respect of two taxation years, in connection with the production of a film. The assessments were upheld, except as to an amount of something over $2000. The Board's decisions were delivered on 6 February this year, and there are, we are told, instructions Tor an appeal. A claim was also made for an income tax deduction of $500,000, in part in reliance upon section 26AA(2) of the Act, which relates to annuities, and in part on 5.51 of the Act, for interest paid on money borrowed to purchase the annuities. His Honour was of the view that there could possibly be a bona fide dispute about this amount. There was no evidence either way concerning the merits of the matter, and His Honour expressed the view that the deduction as claimed would at the least be extremely difficult to sustain. Although counsel has invited us to make a close analysis of what his Honour said in his fully stated reasons concerning his refusal of the applications, we are quite unable to discern any valid basis for interfering with his decisions. We have no reason to doubt that what his Honour did was entirely correct. The position of the appellant has of course been weakened somewhat in the meantime by reason of the decision of the Board of Review to which we have referred. Counsel for the appellant submitted at the outset that no attempt should be made to lay down rigid rules concerning what should, and 'what should not, be taken into account, and how it should be weighed, in applications such as those which were made in the present case. We agree that, within wide limits, this 15s $0. The eases show that in different circumstances particular matters are given different weight. Some things are apparent ina case such as the present. In the first place, it is quite proper, given appropriate circumstances, that an adjournment for some period be allowed on the footing that an assessment 15s under challenge. in considering the situation, the policy and purpose of s.201 of the Act are important factors. At the same time a court sitting in bankruptcy cannot explore the merits of the reference or appeal, except on the widest footing, to see onthe one hand if a challenge to the assessment is plainly without merit, or on the other hand if assessment is manifestly erroneous. Oppressiveness in proceeding with the hearing of the petition is always a consideration, but this consideration has to be balanced against LE RA EET YA OCTET SP TRE Ree ete aa wf 9 RR TNE ORY OE ETN the intended overation of s.201. Counsel submitted in the presert case that an inquiry should be made as to the amount likely to be recovered ina bankruptcy, and if 1t was nil, or small; that this was a telling factor in favour of an adjournment, if not a dismissal. The bankruptcy court considering a petition for a sequestration order does not usually explore the matter of the debtor's assets, and what can be brought into his estate, or what might be done in connection with accepting or rejecting the claims of other creditors. Whether and to what extent it is appropriate to carry out an investigation of these matters does not arise for decision in the present case. It would certainly seem very unusual to carry out such an investigation on an application for an adjournment. In the present case, his Honour commented in another context that the taxpayer (a medical practitioner) seemed to have little in the way of assets, but that was not a ground for allowing an adjournment or a dismissal. What we have said deals sufficiently, we believe, with the submissions that have been put. In our view the appeal should be dismissed with costs. I certify that this and the four preceding pages are a true copy of the Reasons for Judgment herein of their Honours Mr.Justice Fox, Mr.Justice McGregor and Mr.Justice Wilcox. Fas aa. Lire. Associate Dated: 22 February,1985 i 1 PRR ee Or TET TI ESET Fe SR arn Uy EER TT at == mem emNre me © 2m TN THE FEDERAL COUPT OF ANSTRALTA NEW SOUTH WALES DISTRICT REGISTRY of 1994 a be] QQ S Ww oD GENERAL DIVISION OM APPRAL from a Single Judge of the Federal Court of Australia BETWEEN - VIRENDRA (IMAP VERM2 AND- DEEUTY COMMISSTONER CF TAMATTOM Pespondent Q9PDER TIIDGE: FOX, McGREGOP and WILCN¥ TS, DATE OF QRDEP- 22nd February 1985 EX _ TEMP9OPE WHERE MALE: Sydney. THE COMRT OPDEPS THAT: 1. The appeal be dismissed. 2. The appellant pay the resnondent's casts of the appeal. IN THE FEDERAL COMPT OF _ AMSTRALTA } NEW SOUTH WALES DISTRICT PEGTISTPY ) Na, G429 af 15k. ) GENEPAL DIVISTON \ rom 4 Single Jiidee of *the Federal Courr of BETAREN : VWIRENDRA KUMAR VFPMA AND: DEPUTY COMMTESTONFER OF TAMSTION COE AM FO¥, McGPEGOR and WILCOM FF. DATF., 22 Feoruacvy, LORS PRASONS PAR TICMENT (EX TEMPORE) roy 1 His Honour refused applications by the appellant to o a it ) the dismiss the netition in reliance upen $.52(2)¢ B ankruptey Act 1966 ard, alternatively, to adjourn the hearing cf the petition, but granted ai stay of proceedings on the sequestration order far twenty-one days. Tris stay, we are informed, was subsequently extended until the detitrminacion cf this appeal. The situaticn was, ain its elenents, commen enouwsh. The Depity Commissicner of Tayation had 1esuedi fa fhe: acrellanit a number of asseserents for income tax. He had disallowed larsye rlaims far deductions. The petition was paged on chs sssesements, the amount ct indebtedness elarmed being $537,692.27. In August 1922 audgment had beer signed by aefasit in' the Susreme Court for two of the assessmertz, tekatlins SP21,793.F7, An the filme ot the hearing of the petitran and, indead hefore andgmnent was signed. 'the assessments hac bear them. and aitovwas mor expected that it wevld be abla tc te a7 mmncil game time well iunta Loer Th 2a¢ the vefucal cf ats Horour ta dismiss the rnetiiiir ac Fo qrant the adjournmert which 13 1n subs*ante She eubqeck if this anpeal., Te 1s achknawledgsd that i eirher arirs rha everoise of a discrerion vas involved Te pz nce c]arrad occas, naving yatuosred the adqournreck, brs Boner material Eefore him on which me oreuld sequestration order. oO We have been informed by counsel that since the time of the hearing before his Honour, the Board of Review has heard and decided a reference oc references with respect ta fhe amount of 743.67. This amount comprised almost entireiy a claim for a deduction made by the appellant purportedly under Divisicn 198 of Part III of the Income Tax Assessment Act 1936 ("rhe Act"), in yesoect of £ taxabion years, in connection with the eroducttcr WO of a film. The assessments were upheld, except as tc an amount 6 February cwhis year, and there are, ve are tol?, instructions RN elaim was aleo made for oan imecme rar dadeerper cf £500,000, 1n part in reliance upon sectiad 20AAr Ts sf Pus bor, ct - ei which relates to annuities, and in part on 2.8L Tf "he Arr, fer interest paid en money borrcwed ta ourctnase the sannurties Fis Honour was of the view that there cauia coseiEly vs a bena fide dispoute about "his arcunt. Ther 2 no acidercs either way concerning the merits of the mathker, 32 Hes Horcusc exvressed the view that the deduction az claimed world oar fhe a leacr be axyrramely atfficwls toa esusrain. ws ba nave a oe ase angtrss ur of whet Ars Homcus gard oun his fully etated raasone tone-rning his refusal of the applications. we are quite unable ta discern any valid basis for interfering with his decisions. We have no reason tro doubt that what his Honour did was entirely correct. The position of the appellant has of course been weakened somewhat in the meantime by reason of the deacistor af the Poard of Review to which we have referrec. Counsel for the appellant submitted at the suteet that no attempt should be made ro lay down rigid rules concerning what should, and what should not, be taken arto acrtrunt. and hew 14 should be weighed. in asplications such as those which were made in the present case. We agree that, within wile limits. this ve ao, The eases thew rhat in different riccumetanves pret irular tTansidering the situation, the pelicy and furrcctrte cf ¢ 201 af "te Act are wmoertant factorz. At the gane tima a t7us Sankruprey cannot exvlore the merits of the referance cr sppeal, except on the szidast footing, to $46 on the one card if 4a thalierge to the assesment its olairly withovt werit, 27 cr tne etner band if assessment te menifestiy aryrqreou: Oar lees verars te peocsecging vith the "eaerine cf the wnerritien ts alcare a 151) the intended operation of s.201. Counsel submitted in the present case that an inquicy should be made as to the amount likelv to he recovered in pa) bankruptcy, and 1f it was nil. or small; that this was a tellirg St factor in favour cf an adjournment, if not a dismissal. wa The bankruptcy court considering a netitio fac a ee, his On] Tn the oresent c rontext thar the tazvayer (a medical le in the way of assets, but that was mot adeturd fir What we have said deals sufficien we "gyis) ot) Pr be if D . a r uT Me] tre subtri¢ssians vrhat have hear saculd bse diemissed snth cists. I certify that this and the four preceding pages are a true copy of the Reasons for Judgment herein of their Honours Mr.Justice Fox, Mr.Justice McGregor and Mr.Justice Wilcox. Pahoa Lik 2 Associate Dated: 22 February,1985